When I hear people talk about “Tier 1 liquidity,” the first thing I want to know is: how much PnL can you actually handle?
Because it’s easy to look like Tier 1 when everything is calm. The real question is what happens when clients have a very good month, volatility picks up, and several traders are profitable at the same time.
Can you actually carry that flow without widening spreads, increasing slippage, changing conditions or suddenly making things difficult?
That’s where the “Tier 1” label starts to matter less.
Somehow, everyone is Tier 1 now. So instead of taking the label at face value, these are the questions I think you should be asking:
How much capital is actually behind the book? How many Liquidity Providers (LPs) are you using? How much risk are you willing to take? What happens when the market gets ugly? Do execution and conditions stay consistent?
Because from a trader’s side, you don’t really care how impressive an LP looks when everything is going well.
You care about what happens when you’re profitable.
A good deal with an LP that can’t carry your risk is still a bad deal.
So test it with real flow. Watch the spreads, fills, rejects, depth and support.
Then you’ll know what your LP really is.